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Jon Notley, the former commercial director at Zoopla, has revealed his new venture exclusively to EYE.

It is called Zero Deposit Scheme, aimed at the private rented sector and to be launched later this year.

While not first in the market – there are competitive offerings already gaining traction – it looks to have the firepower that others would struggle to match, thanks to Zoopla’s multi-million pound backing.

Essentially, it aims to solve the affordability issue for tenants who struggle to raise deposits, while giving landlords exactly the same benefits they get now from tenancy deposit schemes, including an independent dispute resolution service at the end of the tenancy.

Agents will also be paid referral fees for introducing the scheme to tenants.

With the Zero Deposit Scheme, incoming tenants will be given the choice of either paying the usual deposit – typically equivalent to six weeks’ rent – or the opportunity to buy a much cheaper insurance policy.

Notley, who left Zoopla at the end of March after a 12-year career in the property portal sector, said: “The cost of the insurance policy will be the equivalent of one week’s rent.

“The average deposit put down by a tenant is currently £1,200. With our product, they would therefore pay £200. It is all about choice, which would be carefully explained to the tenant.

“We have piloted how tenants would react to this at a six-branch letting agent in the midlands.

“It found that 60% of tenants would go for it; 20% answered ‘maybe’; and 20% would not go for it, because they preferred the existing deposit schemes.

“For most tenants, rents are climbing, and raising large sums of money for the deposit is a massive problem in the market.

“In our pilot, there was also evidence that even if the money was available for a deposit, many tenants prefer to hold on to it rather than lock it into a security deposit.”

Notley said that landlords would not lose out, because the insurance policy would cover them for six weeks, in exactly the same way traditional deposits do.

Landlords would also benefit from a key requirement that the tenant retains responsibility for the property.

Notley said: “At the end of the tenancy, if a landlord has a claim and this is accepted, then the tenant pays up.

“If the tenant rejects it or disagrees with some of the claim, then both parties go to ADR (Alternative Dispute Resolution), whose findings are binding.

“If the ADR process rules that the landlord should be paid by the tenant, then we will pay the sum to the landlord and then claim it from the tenant.”

Notley said that he is now in the process of confirming an ADR provider.

He does not believe that the option of tenants being able to buy an insurance at the start of their tenancy will be covered by the forthcoming fees ban.

He said: “I would be astonished, as the consultation itself refers to wanting to improve the situation regarding deposits.”

He added: “It would have been tempting to design a product to solve things purely from the tenant’s point of view, but that might not work for landlords and agents.

“We have designed the Zero Deposit Scheme to appeal to them, too.”

Zero Deposits Scheme is operated by a firm called Global Property Ventures, whose founders Ben Austin and Gavin Wiseman are now stepping into non-executive roles.

Notley is a director, and also CEO, while Simon Embley – also chairman of LSL Property Services – is an investor and non-executive chairman.

As an insurance scheme, it is regulated by the Financial Conduct Authority. Zero Deposit Scheme is under-written by the world’s second largest insurance company Munich Re.

The enterprise is also being significantly backed by Notley’s previous employers, ZPG.

Notley said that Zoopla have made a capital investment in Zero Deposits Scheme along with a number of other investors. ZPG announced their backing on Wednesday morning and Notley said further announcements about the investment round will be made.

As part of the exclusive deal with Zoopla, the scheme will be heavily promoted on its portals over the next four years, and there will also be invaluable integration into ZPG’s agency software products.

Notley underlined that agents will have an ‘on boarding process’ if they want to partner with Zero Deposits Scheme. For example, they will have to meet criteria such as proof of tenancy referencing, and undergo what he called a short period of light but essential training.

He emphasised that there will be no question of a hard sell: agents will be explaining the choice to tenants, and introducing but not selling the product.

Notley said: “There are other players in the market, but we believe we have USPs – notably with the way we have designed our product and in our partnerships with Zoopla and Munich Re.

“We know from the tests we have done that there is a huge appetite for Zero Deposits, and that the scheme overcomes a genuine problem.”

A standard 1 bed flat in London probably costs £1,500 a month give or take about £200 dependent on the area. With 6 weeks deposit (£2,075) plus agent fees, let’s say £500, the total comes to a healthy sum of £4,075 to move in…. to a 1 bed flat! I know of a number of potential movers, normally young couples making decent money, who have decided not to move due to not wanting to incur the additional costs. Many are still on 4 week deposits from their previous place so the extra 2 weeks plus the agent fees often makes them decide to stay put. Any widespread success of schemes like this can only be a good thing for agents by making life a little bit easier for movers resulting in more activity in the rental market.

As a LL this would leave me with Tenants who effectively will have no responsibility for the condition of the property. Why shouldn’t a tenant take some direct responsibility for their actions as well as a stake in the tenancy. No deposits, no upfront costs, leaving a lack of accountability and a recipe for problems for LLs. Yet another clever scheme that will make a situation worse not better.

Been here and tried this, and in principal it should work, but it doesn’t for a number of reasons which others have already mentioned.

1. A tenant expects to pay a deposit, and should be able to raise the deposit to become a tenant, makes them think about looking after the property.

2. A landlord expects there to be a deposit.

3. A lot of tenants aren’t having to raise the deposit, they have it albeit lodged against another property, it becomes simply a cash flow exercise for them, from the payment of one, to the release of the other.

Better to wait and find out if deposits are banned? This is more ammunition for why a ban could be made workable, as on paper it sounds good and those that wish to see a ban will use it to their advantage. It is good to see that other posters have acknowledged that the deposit has an influence on the attitude of tenants to behave, so its not just about claiming after that horse has bolted (again). The premium seems a bit steep if you ask me and will certainly raise the bad conduct of; “well I’ve paid insurance, so do I care”! People need to remember whole story of needing a deposit, not try and fix a wheel that isn’t broken for commercial gain.

Those that use the insured schemes will not like this new venture, as they will not be getting a cashflow.

So to summarise, the tenant who is quite sure that they will look after the property and get their full deposit back will continue to use the traditional route as it will not cost them anything, and if they are short of funds could put it on a credit card with a low APR.

The tenant who knows they may damage the property, not trust themselves with other peoples stuff will opt for the insurance policy as it will only cost them 1 weeks rent as a deduction ?

There are 2 big considerations with these schemes- the psychological effect this would have on a ‘borderline’ tenant who takes extra care because their money is at risk. If a tenant pays £200 but has £1200 worth of cover will they take that care not to put that hot saucepan on the wooden worktop, will they lift the sofa when moving it rather than dragging it…and so on. The tricky thing is, the cost of damage is one thing but the hassle and time lost addressing works is another- as time literally is money in lettings.

The other question is what value a Tenant gets from the policy. If they stay in 1 property for years and a sible policy can roll over, then a small cost for years of cover probably wins out. However, if like so many tenants, you move every year or so in 5-10 years you can accrue physical costs of £1000-2000 rather than a transitioning deposit.

What wins out in the end will, by and large, be dictated by the attitudes of both agents and landlords but the defacto position for most (and for sound reason) is ‘if the tenant can’t/won’t pay a deposit, do I really want them as a tenant’.

From every scheme I have discussed structure with so far, any claim would follow a ‘dispute’ process. This is anoter concern for a Landlord- whereas a Tenant may agree to a reasonable deduction quickly & amicably (lets not forget only around 2% of registered deposits end in a dispute being filed) quickly placing a landlord in pocket to act quickly. If any & all deductions are required to go through a dispute process what will this mean in terms of schedule of payout? Also, insurers arent typically generous with payouts so what will that mean if terms of a successful ‘claim’? Any claims will have to be supported in the same way a dispute would again placing a burden on Landlords/Tenants.

Lots of questions but only time will tell. One of the biggest challenges for these offerings will be that there are a lot operating in what is still a small space so what their burn rate is and how long they can sustain it is yet to be seen.

Sorry I’m rather late to this thread but have I missed something in the press , having been away? While referencing fees are possubly going to be banned where has the discussion of no deposits allowed come from?

Without a tenant funded deposit there is no incentive for a tenant to look after the property; tenants may move more frequently knowing they don’t have to pay a ‘traditional’ deposit.

A tenancy is a two sided agreement. The landlord agrees to do things; the tenant agrees to do things. If a tenant cannot afford the deposit then sorry I know its non PC to say so but why, if they cannot save for a deposit should they be entitled to rent? A proper deposit teaches people responsibility and to look after and respect other peoples property.

Exactly Traditionalist. What motivation has the landlord got to accept a zero deposit tenant? Well, apparently the insurers treat a claim as just that, a claim. So, there is no TDS process. If presented as fact then the claim should almost automatically go the landlords way. This could be a pro for the landlord but there needs to be a seismic mind-shift of landlords to accept zero deposits (as mentioned above, until zero deposits are standard, most landlords will be of the mindset that zero deposit = affordability issues)

These schemes may succeed but I believe the major movement will come from tenants, not landlords.